How To Deal With Navient Student Loan Servicing Problems And Lawsuits

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Have you ever felt like you will make payments on your student loans forever? How many times have you called Navient Student Loan Servicing to have a student loan customer service representative tell you that you are not eligible for a lower payment, but you can go into forbearance? Or even worse, your payments are higher than you can afford? Many of us have experienced the headache of dealing with payments that were misapplied, delayed in processing, or even lost in the mail!

​You probably feel as though you will never be able to pay back your student loans- many of these actions prevented borrowers from getting a fair shot at repaying student loan debt. As it turns out, it is not your fault. Many borrowers have faced similar issues, and recent litigation has brought these alleged unfair practices into the forefront.

​This article will help you understand the lawsuit, as well as your options to pay down your student loan in the most efficient way possible. At the end of the article, there are several resources to take immediate steps to optimize savings on your student loan repayment plan.

​Navient, a popular student loan servicer that currently services over $300 billion of government and private student loans, recently got served with a lawsuit that could shake up the entire world of student loans. Navient has grown into one of the largest servicers of student loans since its separation from Sallie Mae, with more than half of its accounts coming from a contract with the Education Department, according to the Consumer Financial Protection Bureau (CFPB).

If Navient is your student loan servicer, then you will want to pay close attention as you are reading this. Even if Navient is not your student loan servicer, this article will be an eye-opening read for how to approach your student loans moving forward.

Who Is Navient Student Loan Servicing?​

To fully understand the role of Navient, we have to first understand the role of Sallie Mae. Navient is a student loan servicer that was formed after the 2014 Sallie Mae split.

​In 1972, Sallie Mae was established as a government-sponsored enterprise (GSE), and was later privatized in 2004, when Congress terminated Sallie Mae’s federal charter. Sallie Mae was a loan servicer for two federal student loan programs: the Direct Loan Program and the Federal Family Education Loan Program.

​In 2014, Sallie Mae was divided in two parts: the consumer banking business, which is known as Sallie Mae, and the student loan servicing operations, which became Navient. Now, Sallie Mae claims that Navient is responsible for “all costs, expenses, losses and remediation” arising from the state lawsuits. However, Navient still stands to benefit, having inherited 95 percent of Sallie Mae’s assets, including servicing rights to $300 billion in student loans.

What Do They Do?

​Student loan servicers serve as a liaison between the lender and borrower. They process payments, answer questions, and keep track of the borrowers accounts. A loan servicer will also work with you for free on student loan repayment plans and student loan consolidation.

​Federal Student Loan providers will assign a loan service provider through the US Department of Education, whereas the private loan lenders will assign private student loan providers.

​If you have student loans, you will find at some point, your student loan has been transferred to another servicer. When your loan servicer has been transferred, you must immediately contact the new student loan servicer, update your payment method (auto pay is the preferred method) to make timely payments, and ensure that there are no changes to your loan terms.

What You Need To Know About The Navient Lawsuits

According to a lawsuit filed by the CFPB, Navient has been faced with allegations of misallocating payments, steering people into costly plans, and supplying the wrong information when borrowers pleaded for help with high monthly payments. Some of the allegations against Navient include misapplied payments, surprise late fees, processing delays, and misrepresentation of repayment options and repayment amounts.

​Some of the allegations against Navient include misapplied payments, surprise late fees, processing delays, and misrepresentation of repayment options and repayment amounts.

​The CFPB and the state attorneys general are all seeking financial redress for borrowers they say were harmed by Navient’s actions.

​“The lawsuits are full of deeply disturbing allegations,” said Rohit Chopra, senior fellow at the Consumer Federation of America and the former student-loan point man at the CFPB. “If this is true, then the company’s actions may be responsible for some of the pileup of defaults that we’ve seen in recent years.”

Navient Allegedly Forced Borrowers Into Forbearance

​Even more disturbing allegations say that Navient incentivized employees to encourage borrowers to postpone payments through forbearance, an option in which interest continues to accrue, rather than guide borrowers down the correct path and enroll them in an income-driven repayment plan that would avoid fees. CFPB alleges that Navient racked up $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple and consecutive forbearances from January 2010 to March 2015.

​CFPB further alleges Navient misled borrowers about the terms of renewing enrollment in income-driven repayment plans that limit monthly bills to a percentage of earnings, and also over reporting the loan discharge of disabled borrowers to the credit bureaus. The complaint further alleges that Pioneer Credit Recovery, a subsidiary of Navient, made illegal misrepresentations about the federal loan rehabilitation program available to defaulted borrowers.

Illinois and Washington allege that Navient and its former parent company Sallie Mae provided “risky and expensive” subprime private student loans that carried high interest rates and fees. Madigan notes that the loans were mostly provided to students enrolled in for-profit colleges.

Past Lawsuits Involving Service Members and Disabled Veterans

This is not the first time Navient had issues with regulators. The Justice Department fined the company millions of dollars for unlawfully charging active-duty service members high interest rates and late fees on student loans, violations that the company called “processing errors.” That case escalated to a dispute between congressional Democrats and the Education Department, which revealed that Navient charged some military personnel more than 6 percent interest as permitted by law. However, critics allege that the investigation was flawed in its sampling procedures. Nevertheless, there still remains significant room for improvement. We have to take steps to protect our credit from the student loan servicers errors and omissions.

Erroneous reports of loan discharge also result in adverse tax consequences, because the loan discharge amount is treated as income.

Sen. Elizabeth Warren (D-Mass.), a longtime critic of Navient, said the CFPB’s lawsuit “could help put money back in the pockets of thousands of borrowers, including disabled veterans who have been harmed by this company’s repeated law breaking.”

Navient's Response

Navient claims that the lawsuit is politically motivated, and denied all allegations. In a statement, Navient contends that the standards the CFPB are using to reach its conclusions are “inconsistent” with the Education Department’s regulations. Navient claims that the lawsuit is politically motivated, and further alleges that the CFPB issued an ultimatum to settle by Inauguration Day or be sued. While there are two sides to every story, you have to protect yourself against errors in your student loan payments, interest rates, repayment terms, and credit report.

How Do The Navient Lawsuits Affect Your Student Loans

Whether Navient is your student loan service provider or not, you should get up to speed on all the options that are available to you today.

First, you may have already been told that you are locked into high monthly payments believing there is no other option. There are fees, expenses and interest rates you can minimize, or avoid altogether, if you select the right option based on your current situation. In this situation, read our article on income-based repayment plans and repayment options to see if you have a better potential solution.

If your student loan servicing provider inaccurately report missed or late payments to the credit bureau, these mistakes will have an adverse impact on your credit report. This affects your ability to borrow- this means that your dreams to buy your first home could be delayed due to inaccurate amounts being reported as discharged or owed. Make sure that you are actively disputing items that are incorrect on your credit report.

We recommend using a free service like Credit Karma to monitor your credit and help you take action if things aren't correct.

Am I Entitled To Damaged From The Navient Lawsuit?

Sadly, no. The Consumer Financial Protection Bureau (CFPB) filed the lawsuit against Navient, which is a federal government agency. Since this type of litigation is not a class action lawsuit, you are not entitled to settlement proceeds.

However, depending on the terms of the settlement, there may be some benefits to borrowers in the future.

Where To Get Help With Navient Or My Student Loans?

If you’re struggling with Navient, remember, the first option is to contact your lender. You can also DIY many options on StudentLoans.gov.

You can do this in a variety of ways, but I recommend looking using Credible, a student loan refinancing marketplace where you can receive offers from multiple lenders after filling out one short form.

Try it out: Credible. It’s free and you can get an estimate of how much you can save by refinancing in less than a minute.

For more extreme cases, contact the Consumer Financial Protection Bureau. If you want to file a formal complaint regarding your federal loan service or a private student loan, such as a loan issued by a bank, credit union, or school. The CFPB oversees financial services companies and enforces federal consumer financial laws. From the date you submit your complaint, the CFPB has 15 days to respond regarding your complaint with the steps they will take to resolve your complaint. You will have 60 days from their response date to provide feedback.

Action Steps To Protect Yourself From Student Loan Servicing Errors

Whenever you're dealing with your student loan servicer, including Navient, the burden of proof is on you to make sure that things don't get messed up. That's why it's essential to document everything.

​Whenever you make a phone call and speak with an agent, follow up your conversation with a written communication, whether it be a faxed or certified mailed letter. Some student loan servicers allow for email under limited circumstances. This way, if there are any disputes, you will have a paper trail to prove your point, and avoid late fees or miscalculations to your detriment.

What kinds of requests should be made in writing? Some of the most significant transactions that could make room for error are payment requests, processing requests, payment instructions, and forbearance.

When sending requests in writing, always send your mail certified mail - that way you have proof it was received. If you're using email, only use the Secure Inbox provided by the loan servicing company.​

Finally, keep a running log of all communications. We recommend a Google Doc or similar, so that you can have it all stored in one place.

2. ​Ensure Your Loan Servicer Follows Payment Instructions

To avoid or minimize mistakes in processing documents with important instructions, be sure to communicate through formal written correspondence to accompany special instructions. This means sending a letter with your student loan account number to accompany the check which also has instructions written in the “memo” section of the check.

Aside from the benefit of timely payments that are documented, automatic payment is a better option than sending paper checks because you may be eligible for a 0.25% interest rate deduction when you enroll in automatic payments.

3. Monitor Your Credit Score And Credit Report

It is crucial for you to monitor your credit score and credit report for errors, because your ability to make timely payments can significantly impact your credit score. You can monitor your credit score and credit reports on the three major credit bureaus: Experian, Equifax, and Transunion. You can request a copy of your credit report from each lender, or use a resource such as AnnualCreditReport.com.

Student Loan Servicers frequently make mistakes in reporting accurate student loan payments to the credit bureaus. Unfortunately, you have to monitor your credit report regularly and take steps to correct any mistakes.

“Navient has systematically and illegally failed borrowers at every stage of repayment,” CFPB Director Richard Cordray said on a call with reporters Wednesday. “These unlawful practices have cost student-loan borrowers across the country both heartache and money. And we are working to make sure they do not happen again.”

The CFPB acknowledges the critical impact on borrowers as a result of flaws in the loan servicing system. The errors could stand in the way buying decisions that are impacted by your credit report, such as buying a home. While you shouldn’t be responsible for the student loan servicer’s mistakes, being proactive will save you time and effort in the long run.

Final Thoughts

While your student loan servicer is there to help you understand your available options for student loan repayment, you must do your due diligence to explore all of your options.

Filed Under: Student LoansTagged With: Navient, Navient Student Loan Servicing, Student LoansEditorial Disclaimer: Opinions expressed here are author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, or other advertiser and have not been reviewed, approved or otherwise endorsed by any of these entities.

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About Robert Farrington

Robert Farrington is America's Millennial Money Expert, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here.

One of his favorite tools is Personal Capital, which enables him to manage his finances in just 15-minutes each month. Best of all - it's free!

He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a mix of properties through Fundrise. Worth a look if you're looking for a low dollar way to invest in real estate.